THE DY CIT RG 8(3), MUMBAI V. M/S. S.M. ENGERY TEKNIK AND ELECTRONICS LTD, MUMBAI

ITA 1492/MUM/2008

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9340 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-12-2014
• Assessment Year: 1993-1994
• Appeal Filed On: 29-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: S A KANJI; FEROZE B ANDHYARUJEENA
• Keywords: Depreciation; Cost of acquisition; Wrong claim
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , !' , ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1492/MUM/2008, # # # # $ $ $ $ / ASSESSMENT YEAR-1993-94 DCIT-8(3), R.NO. 204, 2ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. # VS. M/S. SM ENERGY TEKNIK & ELECTRONICS LTD., SM CENTRE, ANDHERI KURLA ROAD,MAROL NAKA,ANDHERI (E), MUMBAI-400059. PAN: AAACS7312L ( %& / APPELLANT) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + ! !! ! ASSSESSEE BY / :SHRI FEROZE B. ANDHYARUJEENA & S.A. KANJI , + ! / REVENUE BY : SHRI NEIL PHILIP # # # # , ,, , *- *- *- *- / DATE OF HEARING :04 -02-2015 .$ , *- / DATE OF PRONOUNCEMENT :13 -03-2015 # # # # , 1961 , ,, , 254(1) ! !! ! ** ** ** ** !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. ! !' ! # : CHALLENGING THE ORDER DATED 31.12.2007 OF THE CIT(A )-XXIX, MUMBAI, THE ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS. 16,14,810/- LEVIED U/S. 271(1)(C) OF THE I.T.ACT, 1961 WITHOUT APPRECIATING THE FACTS BROUGHT OUT ON RECORD BY THE AO ' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD F ILED ITS RETURN OF INCOME ON 31.12.1993 DECLARING TOTAL INCOME OF RS. 13.01 LAKHS.THE AO CO MPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ON26.03.1996 DETERMINING ITS INCOME AT RS. 83.7 4 LAKHS. DURING THE ASSESSMENT PROCEEDINGS, THE AO DISALLOWED DEPRECIATION AMOUNTING TO RS. 52. 49 LAKHS.THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA),WHO VIDE ITS ORDER DATED 04.02.1999 SET-ASIDE THE ISSUE OF DEPRECIATION TO THE FILE OF THE AO.RE-ASSE SSMENT WAS MADE U/S. 143(3) R.W.S. 250 ON 22.03.2001 ASSESSING TOTAL INCOME OF THE ASSESSEE A T RS.1.11CRORES.THE ASSESSEE AGAIN FILED AN APPEAL BEFORE THE FAA, WHO GAVE RELIED OF RS.10.89 LAKHS.THE ASSESSEE CHALLENGED THE ORDER OF THE FAA BEFORE THE TRIBUNAL.VIDE ITS ORDER,DATED 30 .01.2004,IT RESTORED THE ENTIRE ISSUE TO THE FILE OF THE AO FOR DECIDING AFRESH THE MATER ON MERITS I N ACCORDANCE WITH LAW.THIRD ASSESSMENT WAS COMPLETED ON 28. 02.2005,ASSESSING THE TOTAL INCOME AT RS.1,00,97,008/-.THE AO DISALLOWED DEPRECIATION OF RS.52.49LAKHS.WHILE DISALLOWING THE DEPRECIATION THE AO REDUCED THE SAME FROM ACTUAL DEPRECIATION CLAIMED BY THE ASSESSEE AS PER I.T. RULES. VIDE HIS ORDER,DATED 28. 10. 2005,THE FAA,ALLOWED DEPRECIATION ON OFFICE EQUIPM ENTS @ 25% AT 50% OF THE COST SHOWN BY THE ASSESSEE AND GRANTED PART RELIEF TO IT. 3. IN THE PENALTY PROCEEDINGS,THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED EXCESS DEPRECIATION ON DIESEL GENERATOR SET(DGS),THAT THE ALLOWABLE RAT E OF DEPRECIATION WAS 25% AS AGAINST 50% CLAIMED BY THE ASSESSEE.HE FURTHER HELD THAT THE AS SESSEE WAS AWARE THAT EXCESSIVE DEPRECIATION WAS NOT ALLOWABLE,THAT IT HAD FURNISHED INACCURATE PARTICULARS OF INCOME.AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND LEVIED PEN ALTY AMOUNTING TO RS. 16.14 LAKHS. THE ASSESSEE AGITATED THE MATTER BEFORE THE FAA. BEFORE HIM THE ASSESSEE REITERATED THE FACTS AS STATED AT THE TIME OF ORIGINAL ASSESSMENT AS WELL AS DURIN G THE COURSE OF RE-ASSESSMENT PROCEEDINGS.IT WAS CONTENDED BEFORE HIM THAT VARIATION IN ALLOWING DEP RECIATION LESS THAN WHAT WAS CLAIMED BY ITA/1492/MUM/2008,AY.1993-94-SMETL 2 ESTIMATING ON COST ON ACQUISITION WAS A MATTER OF O PINION,THAT ASSESSEE HAD NOT FILED INACCURATE PARTICULARS OR HAD NOT CONCEALED ANY INCOME.THE ASS ESSEE RELIED UPON THE CASE OF AJAIB SINGH & CO.(253 ITR 630) AND HARI GOPAL(258 ITR 85) AND REQUESTED THE FAA TO DROP THE PENALTY PROCEEDINGS. AFTER CONSIDERING THE PENALTY ORDER AND THE SUBMISS ION OF THE ASSESSEE,THE FAA HELD THAT THE AO HAD LEVIED CONCEALMENT PENALTY ON AN INCOME OF RS. 31.20 LAKHS,THAT QUANTIFICATION OF THE SAID AMOUNT WAS NOT CLEAR, THAT PENALTY HAD BEEN LEVIED ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION, THAT DEPRECIATION CLAIMED BY THE ASSESSEE WAS RS. 5 2.49 LAKHS,THAT WAS DISALLOWED IN TOTALITY BY THE AO,THAT FAA HAD ALLOWED PART OF THE CLAIM, AMOU NTING TO RS.10.64 LAKHS, THAT BALANCE AMOUNT WHERE REMAINED TO BE DISALLOWED WAS RS. 41.84 LAKHS , THAT IF PENALTY WAS TO BE LEVIED FOR WHOLE AMOUNT THEN IT SHOULD HAVE BEEN LEVIED FOR RS. 41.8 4 LAKHS AND NOT FOR RS. 31.20 LAKHS. HE FURTHER OBSERVED THAT DISALLOWANCE CONSISTED OF TWO ITEMS, THAT ONE WAS REDUCTION IN THE CASE OF ACQUISITION OF THE ASSETS ON WHICH DEPRECIATION HAD BEEN CLAIMED,THAT THE SECOND ISSUE ABOUT REDUCTION IN THE RATE OF DEPRECIATION,THAT IN THE O RIGINAL ASSESSMENT DATED 26.03.1996 THE CLAIM TOTALLY DISALLOWED, THAT THE THEN FAA HAD ALLOWED T HE CLAIM IN PART, THAT THE TRIBUNAL HAD SET-ASIDE THE ORDER PASSED BY THE FAA AND HAD RESTORED BACK T HE MATTER TO THE FILE OF THE AO, THAT IN RE- ASSESSMENT PROCEEDINGS THE AO HAD DISALLOWED THE CL AIM AGAIN,THAT THE FAA AFTER EXAMINING THE DETAILS GAVE A FINDING THAT ASSESSEE HAD PURCHASED THE ASSETS,THAT HE HAD HELD THAT THE ACQUISITION SHOWN BY THE ASSESSEE WAS HIGHLY EXAGGERATED,THAT H E REDUCED THE COST TO 50% OF THE CLAIM,THAT THE FAA HAD ALSO HELD THAT DEPRECIATION WAS TO BE A LLOWED AT 25% ON DGS AND NOT @ 100%,AS CLAIMED BY THE ASSESSEE.THE FAA HELD THAT PENALTY U /S. 271(1)(C) WAS LEVIABLE TO THE EXTENT OF COST OF ACQUISITION THAT WAS REFLECTED,THAT PENALTY WAS NOT LEVIABLE ON REDUCTION IN THE DEPRECIATION RATE ON THOSE ASSETS,THAT THE ASSESSEE HAD PURCHASE D DGS AND OTHER EQUIPMENTS FROM ITS SISTER CONCERN. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THA T THE ISSUE BEFORE THE AO WAS NOT THE ISSUE WHERE TWO VIEWS WERE POSSIBLE,THAT THE DGS WA S NOT A ENERGY SAVING DEVICE,THAT THE ASSESSEE HAD MADE AN INACCURATE CLAIM AND HENCE THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 271(1) (C)OF THE ACT.AUTHORISED REPRESENTAT IVE(AR)CONTENDED THAT MATTER HAD TRAVELLED UP TO THE TRIBUNAL FOR THE THIRD TIME,THAT THE ASSESSE E HAD NOT CHALLENGED THE QUANTUM INVOLVED THAT THE AO HAD ALSO ACCEPTED THE FIGURE,THAT DISPUTE WA S ABOUT RATE OF DEPRECIATION,THAT THE DGS WAS PART OF ENERGY SAVING MACHINE,THAT EXISTENCE OF MAC HINE WAS NOT IN DOUBT,THAT IT WAS A MATTER OF ESTIMATION,THAT WHEN ESTIMATE WAS MADE NO PENALTY S HOULD BE LEVIED,THAT VARIANCE IN APPLICABLE DEPRECIATION RATE DID NOT DESERVE CONCEALMENT PENAL TY,THAT ISSUE RELATED TO CLASSIFICATION OF EQUIPMENT,THAT THE ASSESSEE CLAIMED DEPRECIATION AT 100% FOR DGS BUT THE AO TREATED IT PLANT AND MACHINERY AND LESSER DEPRECIATION WAS ALLOWED,THAT MY CONDUCT PROVED THAT NO INACCURATE PARTICULAR WAS FILED.HE REFERRED TO THE JUDGMENTS OF RELIANCE PETROPRODUCTS (322 ITR 158)AND OF SMT.K.MEENAKSHI KUTTY(258ITR494)OF THE HONBLE BOMB AY AND HIGH COURT OF RESPECTIVELY. HE ALSO REFERRED TO THE MATTER OF (ITA/5023/ DEL/ 2011). ON A QUERY BY THE BENCH IT WAS ADMITTED THAT THE DGS WAS PURCHASED FROM THE SISTER CONCERN BY THE ASSESSEE AND THE SISTER CONCERN WAS CLAIMING DEPRECIATION AT THE RATE OF 25 % FOR IT.WHEN THE BENCH INQUIRED ABOUT THE APPLICABILITY OF CASE OF ZOOM COMMUNICATION(327ITR5 10)OF THE HONBLE DELHI HIGH COURT TO THE MATTER UNDER APPEAL,THE AR STATED THAT FACTS OF BOT H THE CASES WERE DISTINGUISHABLE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE PROCEEDING FURTHER,WE WOULD LIKE TO CONSIDER THE CASES RELIED UPON BY THE ASSESSEE.IN THE CASE OF K MEENAKHSI KUTTY(SUPRA)THERE WAS DIFFERENCE IN THE I NCOME RETURNED BY THE ASSESSEE AND THE INCOME ASSESSED BY THE AO ON ESTIMATED BASIS.THE AY .S.INVOLVED WERE 1971-72 TO 1973-74.THE MATTER WAS DECIDED AS PER THE EXISTING LAW I.E.BEFO RE THE INTRODUCTION OF EXPLANATION TO SECTION 271(1)(C)OF THE ACT.THE HONBLE MADRAS HIGH COURT H AD HELD AS UNDER: ITA/1492/MUM/2008,AY.1993-94-SMETL 3 THE TRIBUNAL IN THIS CASE HAS CLEARLY HELD THAT TH E ESTIMATE GIVEN BY THE ASSESSEE WAS NOT THE RESULT OF ANY GROSS OR WILFUL NEGLIGENCE AND THAT P ENALTY WAS NOT CALLED FOR. IT IS CLEAR FROM A READING OF THE ORDER OF THE TRIBUNAL THAT, THE TRIB UNAL WAS OF THE VIEW THAT, THE ESTIMATES GIVEN BY THE ASSESSEE ARE NOT SUCH AS TO BE REGARDED AS DELI BERATE UNDERESTIMATE OF INCOME. THE DECISION RELIED ON BY THE REVENUE, THEREFORE, IS NOT OF ANY ASSISTANCE ON THE FACTS OF THIS CASE. IN OUR OPINION THE CASE BEFORE US CANNOT BE COMPARE D WITH THE MATTER OF MEENAKHSI KUTTY (SUPRA).HERE,WER ARE NOT DEALING WITH A MATTER WHER E THE ESTIMATE OF ONE PERSON HAS BEEN REPLACED BY THE ESTIMATION OF OTHER PERSON.SECONDLY,CONCEPTS OF WILLFUL NEGLIGENCE OR DELIBERATE ATTEMPT HAVE NO PLACE IN THE NEW PENAL PROVISIONS.SECTION 2 71(1)(C) AS APPLICABLE FOR THE AY UNDER APPEAL TALKS OF EXPLANATION FILED BY THE ASSESSEE A ND THE BONA FIDE OF SUCH EXPLANATION. BESIDES,THE ACCEPTANCE OF THE EXPLANATION BY THE AO IS ALSO ONE OF THE DECIDING FACTOR. IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (S UPRA)THE ASSESSEE HAD MADE A CLAIM U/S. 36(1) (III) OF THE ACT.THIS DEDUCTION HAD ALSO BEEN CLAIM ED BY THE ASSESSEE IN THE EARLIER YEAR AND THE FAA HAD ALLOWED THE DEDUCTION,WHILE THE ITAT HAD RE STORED THE ISSUE BACK TO THE FILE OF THE AO. DECIDING THE APPEAL TRIBUNAL HELD THAT THE ASSESSE E HAD DULY FILED AN EXPLANATION GIVING THE REASONS FOR MAKING A CLAIM,THAT ONCE THE ASSESSEE O FFERED AN EXPLANATION THE ONUS WOULD SHIFT ON THE REVENUE TO PROVE THAT THE EXPLANATION OFFERED B Y THE ASSESSEE WAS FALSE, THAT BONA FIDES OF THE EXPLANATION WERE CLEARLY PROVED,THAT NO MATERIAL OR EVIDENCE WAS BROUGHT ON RECORD OR POINTED OUT BY THE DR PROVING THAT THE REVENUE HAD DISCHARGED I TS ONUS FOR PROVING THE FALSENESS OF EXPLANATION OF THE ASSESSEE, THAT THE ASSESSEE HAD ALSO DULY DISCHARGED ITS ONUS WHICH WAS CAST ON THE ASSESSEE.WHEN THE MATTER TRAVELLED UP TO THE HO NBLE SUPREME COURT IT WAS OBSERVED BY THE APEX COURT THAT IN THAT CASE, THERE WAS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR F ALSE, THAT SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT. IN OUR OPINION, FACTS OF THE RELIANCE PETRO PRODUCTS PVT.LTD.(SUPRA)ARE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER APPEAL. IN THE PRESENT CASE THE AO AS WELL AS THE FAA HAS G IVEN A FACTUAL AND CATEGORICAL FINDING THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULAR OF INC OME AND HAD CONCEALED INCOME. BOTH OF THEM FOUND THAT EXPLANATION FILED BY THE ASSESSEE WAS NO T AS PER THE PROVISIONS OF LAW. IT IS TRUE THAT THIS THE THIRD ROUND OF LITIGATION, BUT THE FACT IN ITSELF IS NOT A DECISIVE FACTOR TO ADJUDICATE THE ISSUE OF IMPOSITION OF CONCEALMENT-P ENALTY.IT IS FOUND THAT THE FAA HAD HELD THAT THE ACQUISITION COST OF THE MACHINERY,PURCHASED BY IT FROM THE SISTER CONCERN,WAS HIGHLY EXEGGRA - TED,THAT THE ASSESSEE HAD NOT CHALLENGED THE FINDIN G GIVEN BY THE FAA.IF THE MACHINERY USED BY THE SISTER CONCERN AFTER CLAIMING DEPRECIATION WAS SHOWN AT A PARTICULAR COST THEN HOW IT CAN COST MORE THAN THE WDV TO THE ASSESSEE WHEN IT PURCHASED THE SAID MACHINERY.IT IS A CASE WHERE PURCHASE WAS NOT MADE FROM AN OUTSIDER.THE ASSESSEE HAS NEVER EXPLAINED AS TO HOW THE COST OF ASSETS INCREASED WHEN IT ACQUIRED THEM.WE FIND THAT THE FAA HAS SUSTAINED THE PENALTY ON THAT COUNT AFTER HOLDING THAT THE COST OF MACHINERY SHOU LD BE TAKEN AT A PARTICULAR AMOUNT.IN OUR OPINION,HIS ORDER TO THAT EXTENT DOES NOT DESERVE A NY INTERFERENCE.AS FAR AS RATE OF DEPRECIATION IS CONCERNED WE FIND THAT THE SISTER CONCERN WAS CLAIM ING DEPRECIATION @ 25% ON THE DGS,BUT THE ASSESSEE CLAIMED THE DEPRECIATION AT 100%.NO BONA F IDE EXPLANATION FOR CLAIMING HIGHER DEPRECIATION WAS FILED BY THE ASSESSEE BEFORE THE A O. IT IS A VERY WELL KNOWN LEGAL PROPOSITION THAT IF A N ASSESSEE CLAIMS ANY DEDUCTION,HE HAS TO SUBSTANTIATE HIS CLAIM BY PRODUCING POSITIVE EVIDEN CE.ACT HAS PROVIDED CERTAIN DEDUCTIONS UNDER THE VARIOUS HEADS OF INCOME AND SAME CAN BE CLAIMED ACCORDINGLY.DEPRECIATION IS AN ALLOWABLE ITEM AS PER THE PROVISIONS GOVERNING THE INCOME FRO M BUSINESS AND PROFESSION.THE ACT HAS PROVIDED RATES OF DEPRECIATION AND MANNER OF CLAIMI NG DEPRECIATION.THE ASSESSEE ARE EXPECTED TO FOLLOW THE PROVISIONS OF THE SECTIONS OF THE ACT,IN COME TAX RULES,1962(RULES)AND THE SCHEDULES WHICH DEAL WITH DEPRECIATION OF ASSETS.IN THE CASE UNDER CONSIDERATION RATE DEPRECIATION ON DGS WAS KNOWN TO THE ASSESSEE.THE SISTER CONCERN WAS CL AIMING DEPRECIATION ON A PARTICULAR RATE,BUT ITA/1492/MUM/2008,AY.1993-94-SMETL 4 THE ASSESSEE DECIDED TO CLAIM @100%.THE BASIS FOR C LAIMING HIGHER RATE IN KNOWN TO THE ASSESSEE ONLY. WE ARE OF THE OPINION THAT THERE IS FUNDAMENTAL DIF FERENCE IN A DEBATABLE CLAIM AND A PATENTLY WRONG OR FALSE CLAIM.THERE HAVE TO BE DIVERSE OPINI ONS OF HONBLE COURTS ABOUT THE CLAIMS MADE UNDER THE FIRST CATEGORY AND WHERE ASSESSEE CAN ADO PT ONE OF THE VIEWS.IN SUCH CIRCUMSTANCES,ONE CAN SAY THAT ISSUE HAS NOT REACHED FINALITY AND IF ASSESSEE HAS OPTED FOR ONE OF THE POSSIBLE VIEWS, HE SHOULD NOT BE VISITED BY PENAL PROVISIONS.BUT,TH E CLAIMS MADE UNDER THE SECOND CATEGORY HAVE NO LEGS OF THEIR OWN TO STAND.CLEARLY,SUCH CLAIMS A RE NOT TENABLE LEGALLY OR FACTUALLY.IF A CLAIM OF DEDUTION PUT FORWARD BY THE ASSESSEE IS NOT LEGALLY VALID AND RESULTS IN EVASION OF TAXES, PROVISIONS OF SEC. 271(1) (C) COMES IN PICTURE.THE PHRASE PAR TICULARS OF INCOME APPEARING IN SECTION 271(1)(C),HAS TO BE INTERPRETED AS FACTS LEADING TO CORRECT COMPUTATION OF INCOME.SO,IT CAN BE SAFELY SAID THAT WHENEVER ANY MATERIAL FACT,FOR COR RECT COMPUTATION OF INCOME,IS NOT FILED OR IF FILED IS INACCURATE,THEN PENALTY HAS TO BE IMPOSED. PERUSAL OF THE PROVISIONS OF EXPLANATION 1 TO THE SECTION PROVIDE THAT SUCH PENALTY CAN BE IMPOSED ON LY IF THE PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THEM TO BE FALSE OR OFFERS AN EXPLANATION WHICH ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATIN G TO THE SAME AND MATERIAL TO COMPUTATION OF TOTAL IN COME HAVE BEEN DISCLOSED BY HIM. HONBLE DELHI HIGH COURT HAS ALSO DEALT THE ISSUE O F FALSE CLAIM,WHILE DECIDING THE MATTER OF ZOOM COMMUNICATION(SUPRA).IN THAT MATTER DURING THE PENALTY PROCEEDINGS,THE ASSESSEE CLAIMED THAT IT HAD COMMITTED A BONA FIDE MISTAKE AND ALL T HE FACTS MATERIAL TO THE COMPUTATION WERE DISCLOSED.AO WAS OF THE VIEW THAT THERE WAS NO DIFF ERENCE OF OPINION AS REGARDS DISALLOWA-NCE OF THESE EXPENSES AND THE INCORRECT COMPUTATION GIVEN BY THE ASSESSEE WAS AN ACT OF PAYING LESS TAX THAN WHAT WAS DUE FROM IT.FAA UPHELD THE ORDER OF T HE AO.DECIDING THE APPEAL FIELD BEFORE IT,TRIBUNAL ACCEPTED THE CONTENTION OF THE ASSESSEE THAT DUE TO OVERSIGHT AND BONA FIDE MISTAKE, AN ERROR WAS COMMITTED BY THE ASSESSEE BUT SAME COULD NOT BE A BASIS TO LEVY PENALTY U/S.271 (1)(C)OF THE ACT,ESPECIALLY WHEN ALL THE RELEVANT M ATERIALS RELATING TO THAT ISSUE WERE DULY DISCLOSED BY THE ASSESSEE IN THE COURSE OF THE ASSE SSMENT PROCEEDINGS. ACCORDINGLY TRIBUNAL DELETED THE PENALTY.DECIDING THE APPEAL FILED BY TH E DEPARTMENT, HONBLE HIGH COURT HELD AS UNDER : SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATE RIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE INCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961,EVEN IF THE C LAIM MADE BY HIM IS UNSUSTAINABLE IN LAW,PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLA NATION OFFERED BY HIM OR THE EXPLANATION, EVEN IF NOT SUBSTANTIATED,IS FOUND TO BE BONA FIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONA FIDE,EXPLANATION 1 TO SECTION 271(1)(C) WOU LD COME INTO PLAY AND THE ASSESSEE WILL BE LIABLE FOR THE PRESCRIBED PENALTY.IN THAT MATTER IT WAS CLAIMED BY THE ASSESSEE THAT DUE TO OVERSIGHT CERTAIN ITEMS WERE NOT ADDED BACK TO TOTAL INCOME. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMAL L PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLA IM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNIS HED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW T HAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE M ADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BO NA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO M AKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THE M, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED O N THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. TH E CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED ITA/1492/MUM/2008,AY.1993-94-SMETL 5 UP FOR SCRUTINY.THIS WOULD TAKE AWAY THE DETERRENT EFFECT,WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. WE FIND THAT THE ASSESSEE BEFORE US DID NOT EXPLAIN EITHER TO THE INCOME-TAX AUTHORITIES OR TO THE INCOME-TAX APPELLATE TRIBUNAL AS TO IN WHAT CIRCUMS TANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED,WHILE COMPUTING THE INCOME OF THE ASSESSEE-COMPANY.WE CANNOT LOSE SIGHT OF THE FACT T HAT THE ASSESSEE IS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATION OF IT S INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJECTED TO AUDIT. IN THE ABSENCE OF ANY DETAILS F ROM THE ASSESSEE, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE BEEN LEFT OUT WHILE COMPUTING THE INCOME OF THE ASSESSEE-COMPANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF THE AUD ITORS OF THE COMPANY. CONSIDERING THE FACTS-THAT THE ASSESSEE HAD PURCHAS ED THE MACHINERY FROM THE SISTER CONCERN,THAT THE ASSESSEE HAD NOT CHALLENGED THE PENALTY LEVIED BY THE FAA ABOUT THE HIGHER PURCHASE PRICE OF MACHINERY,THAT IT HAD NOT FILED ANY EXPLANATION FOR CLAIMING DEPRECIATION AT VARIANCE WITH THE DEPRECIATION CLAIMED BY THE PREVIOUS OWNER OF THE A SSET-WE ARE OF THE OPINION THAT IT IS FIT CASE FOR IMPOSING PENALTY U/S.271(1)(C)OF THE ACT.THEREFORE, REVERSING THE ORDER OF THE FAA,WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE AO. AS A RESULT,THE APP EAL FILED BY THE AO STANDS ALLOWED. 0*1 #)* - 3 4 , 5 , * 6. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH,MARCH,20 15. !/ , .$ ! 8 9# 13 , ; , ,, , 201 5 , ? SD/- SD/- ( /JOGINDER SINGH) ( !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 9# /DATE: 13.03.2015 SK !/ !/ !/ !/ , ,, , '*@ '*@ '*@ '*@ A!@$* A!@$* A!@$* A!@$* / COPY OF THE ORDER FORWARDED TO : 1. / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ B C , 4. THE CONCERNED CIT / B C 5. DR E BENCH, ITAT, MUMBAI / @D '*# , . . . 6. GUARD FILE/ 0 (@* '* //TRUE COPY// !/# / BY ORDER, E / DY./ASST. REGISTRAR , /ITAT, MUMBAI